The History of Index Annuities

Index annuities, also known as fixed index annuities (FIAs), trace their origin back to the mid-1990s in the United States. These financial products emerged as a response to the growing demand for investment vehicles that offered both growth potential and protection against market downturns. Insurance companies pioneered index annuities as a hybrid solution combining the security of fixed annuities with the growth opportunities associated with equity markets.

One of the earliest companies to introduce index annuities was Keyport Life Insurance Company in 1995. They launched a product tied to the performance of the S&P 500 index, a popular benchmark for the U.S. stock market. This innovation allowed investors to benefit from market gains while avoiding losses during downturns, thanks to a guaranteed minimum return.

Initially, index annuities were relatively straightforward, offering caps on returns and participation rates that limited the portion of market gains credited to the annuity. Over time, they evolved to include features like income riders, enhanced death benefits, and a wider range of index options. Today, FIAs are offered by numerous insurers and remain a popular choice for individuals seeking retirement income with a balance of safety and growth potential.